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Sunday, October 20, 2013

There's No Such Thing as Market Failure

Guess what? There is no such thing as "market failure." Look up at the title of the article; see? It is right up there. Do you know what there is such a thing as? Politicians, academics, and big businessmen who think they know better than you or need the government to help them out because you do not make their business adventures lucrative. Still not a believer? Well, let me turn you into "The Monkees" and show you how market failure is a myth. I will simply show you what the market is and how it cannot fail, and then I will explain how "market failure" is really "government please help my failing business" or, "I am smarter than you, so do what I say." Ready? Good. Let us see what the market is then and how it cannot possibly fail.

The market is easy to define and once it is defined, it cannot fail. The "market" is you, your family, your friends, your neighbors, and everybody else's family, friends, and neighbors voluntarily deciding what goods or services they will spend their money on, how much of their money they will spend on these goods and services, and where they will purchase these goods and services. That is all there is to it. The market is not a mystical creature or some entity. It is simply individuals making voluntary choices. The choices deal with exchange. Here, read what Murray Rothbard had to say on the issue:

Each exchange is undertaken as a voluntary agreement between two people or between groups of people represented by agents. These two individuals (or agents) exchange two economic goods, either tangible commodities or nontangible services. Thus, when I buy a newspaper from a news dealer for fifty cents, the news dealer and I exchange two commodities: I give up fifty cents, and the news dealer gives up the newspaper. Or if I work for a corporation, I exchange my labor services, in a mutually agreed way, for a monetary salary; here for corporation is represented by a manager (an agent) with the authority to hire.

So if the market is about individuals voluntarily making choices on how much money they are willing to exchange for goods and services that they value according their tastes, how can a choice be a failure? It cannot. To say somebody chose an iPhone over an Android as a failure is absurd, and vice versa. The absence of purchases is also not a failure. If a person decided never to purchase jeans, and wear other types of pants, again, it would be absurd to call that choice a failure. Choices express opinions. To call an opinion a failure is ridiculous. You may disagree with it, but that is all you can do. There you have it: markets cannot fail. So, why do we hear the words "market failure?" Let us find out.

We hear the phrase "market failure" for two reasons. The first is that some high and mighty individual decided that their choices are far more superior to your choices. For example, a high and mighty asshole is green and believes people should buy electric vehicles. Electric vehicles are not selling like hotcakes as evidenced by the lack of citizenry purchasing them and companies showing loses instead of profits for their vehicles? Then, by God, that is a "market failure." Do you see it? A failure exists because every day people's decisions do not match his decisions. The first reason ties into the second reason: a business made a bad prediction and needs the government to give them subsidies or force people to buy the products they clearly do not want. Look at Solyndra a few years ago, a solar panel company. They were not profiting. To Solyndra, and other lovers of green energy, that is a "market failure." What does that mean? People didn't want solar panels; if they did, the company would have made a profit and would not have needed to be bailed out by the government. They guessed you would fall in love with solar panels; you did not, so it must be " market failure," and the government whose decisions are vastly superior to yours for what you desire, stepped in to fix everything. As we all know, Solyndra eventually went out of business. So, those are the reasons why you hear the term "market failure." Understand?

Remember, the market is making decisions, therefore your decision cannot be a failure; it is simply what you desire even though others may disagree with your decision. The only way markets can "fail" is if your decision does not match what others, who think they are more important than you, decide. Now, go forth, knowing your Hulkamania retro, mesh half-shirt is not a failure, but a bad fashion choice.

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